JUL 1997 STOCKS & COMMODITIES Magazine

Article Archive For JUL1997

Computers and Market Analysis by Gregory L. Morris

ARTICLE SYNOPSIS ...Are you just starting out as a technical trader? Or are you a veteran who wouldn't mind a refresher course on the basics? Here's a primer for the novice and a reminder for the veteran covering points of interest, including computer hardware, software and data. by Gregory L. Morris Computers have drastically changed market analysis simply by making almost all analysis techniques available to any-one with a computer. Many believe that this could very well be why some tried-and-true methods don't seem to work anymore; computers have made these methods available to all, leading to overuse. Then ...

AUTHOR: Gregory L. MorrisDATE: JUL1997SUBJECT: Novice Traders' Notebook

Contextual Trader Larry Williams by Thom Hartle

ARTICLE SYNOPSIS ...In the arena of technical analysis, it's hard to imagine not ever having heard about Larry Williams, well known as trader, author, newletter editor and money manager. Think of it -- virtually every technical-based software has some of his technical indicators. Despite all that, surprisingly, Williams is not as fond of technical analysis as you might expect. Why? We found out the answer when STOCKS & COMMODITIES Editor Thom Hartle spoke to Williams via phone on April 23, 1997, discussing Williams's views on technical analysis, money management and other topics. When did you first start trading?...

AUTHOR: Thom HartleDATE: JUL1997SUBJECT: Interview

Dynamic Zones by Leo Zamansky, Ph.D., and David Stendahl

ARTICLE SYNOPSIS ...Dynamic Zones by Leo Zamansky, Ph.D., and David Stendahl Most indicators use a fixed zone for buy and sell signals. Here's a concept based on zones that are responsive to past levels of the indicator. One approach to active investing employs the use of oscillators to exploit tradable market trends. This investing style follows a very simple form of logic: Enter the market only when an oscillator has moved far above or below traditional trading levels. However, these oscillator-driven systems lack the ability to evolve with the market because they use fixed buy and sell zones. Traders typical...

AUTHOR: Leo Zamansky, Ph.D., and David StendahlDATE: JUL1997SUBJECT: New Technique

Evaluating Trading Systems with Statistics by J. Katz, Ph.D.

ARTICLE SYNOPSIS ...Here, in part 1 of two, these Contributing Writers explain the steps necessary to evaluate trading system behavior with the use of statistics. by Jeffrey Owen Katz, Ph.D., and Donna L. McCormick Most systems I have seen are simply optimized by being tested with different parameters, examined for profitability and sometimes assessed for a few other characteristics. On occa-sion, I have encountered systems tested on perhaps one or two out-of-sample� periods to determine whether performance would hold up. However, few who write about system development or developers themselves have attempted to...

AUTHOR: J. Katz, Ph.D.DATE: JUL1997SUBJECT: Trading Techniques

Is Wrong Ever Right? by Adrienne Laris Toghraie

ARTICLE SYNOPSIS ...Following a strategy is key to success in the markets, but what if you make deliberately wrong decisions and still make money? Here are some ways to avoid this form of self sabotage. If traders are going to succeed over the long haul, they must follow their own rules; and in order to do so, they must maintain a state of personal and emotional balance. This paradigm is the essence of my work with traders. However, the problem with this strategy is that we are talking about results over time. In the short term, unfortunately, things can happen quite differently; even the most carefully conceive...

AUTHOR: Adrienne Laris ToghraieDATE: JUL1997SUBJECT: Trading Psychology

Parabolics by John Sweeney

ARTICLE SYNOPSIS ...Here's a look at the parabolic trading system, with details on the way it works and how it's calculated. by John Sweeney Few books have produced as many indicators of lasting value as J. Welles Wilder's New Concepts in Technical Trading Sys-tems. From that single text came the volatility index, the directional movement index, the relative strength index and the parabolic system, among numerous others. Even today, these four are staples of virtually every technical analysis toolbox after all these years because their robust simplicity gets directly to the concepts that percolate in traders' m...

AUTHOR: John SweeneyDATE: JUL1997SUBJECT: Novice Traders' Notebook

Rainbow Charts by Mel Widner, Ph.D.

ARTICLE SYNOPSIS ...Here, in part 1 of two, these Contributing Writers explain the steps necessary to evaluate trading system behavior with the use of statistics. Most systems I have seen are simply optimized by being tested with different parameters, examined for profitability and sometimes assessed for a few other characteristics. On occa-sion, I have encountered systems tested on perhaps one or two out-of-sampleY� periods to determine whether performance would hold up. However, few who write about system development or developers themselves have attempted to estimate probabilities or compute statistical analy...

AUTHOR: Mel Widner, Ph.D.DATE: JUL1997SUBJECT: New Techniques

Selling Vertical Credit Spreads by Jay Kaeppel

ARTICLE SYNOPSIS ...The options trader has available many different strategies, virtually to suit every need and intent. Here's how to use the credit spread strategy. by Jay Kaeppel Most of the money made in options trading is made by those who write options rather than by those who buy them. This is because an option is a wasting asset, the price of which is composed of intrinsic value (equal to the amount by which the option is in the money�) and time premium. (Out-of-the-money� options have no intrinsic value and their prices are composed entirely of time premium.) Options lose all of their time premium by e...

AUTHOR: Jay KaeppelDATE: JUL1997SUBJECT: Options

Traders' Tips

ARTICLE SYNOPSIS ...TRADESTATION In the article "Rainbow charts," author Mel Widner introduces a colorful technique for plotting an oscillator to signal trend changes. The oscillator is derived from a consensus of trends that, when plotted in color, has the appearance of a rainbow. Using a few studies and functions in TradeStation, the rainbow lines and rainbow oscillator can be developed in Easy Language. As always, the functions should be devel-oped first. For the indicators themselves, special formatting is required for each. An outline of the recommended format is given after each set of indicator code. B...

AUTHOR: Technical Analysis, Inc.DATE: JUL1997

V15:7: Letters to S&C

ARTICLE SYNOPSIS ...POINT & FIGURE CHARTING Editor, Concerning Daryl Guppy's March 1997 article ("Building point & figure charts"), the one-box point & figure chart was created incorrectly. When the reversal is one unit, you do not always move one column to the right. The only reason to move one column to the right in any P&F chart is to avoid overwriting the Xs or Os in the current column. You will always need to move to the right in reversal charts of two, three, five or more units, but not with one-unit reversal charts. For example, if the price reverses by only one unit and then reverses back again, you do n...

AUTHOR: Technical Analysis, Inc.DATE: JUL1997